What Investors Should Know About Keppel DC REIT’s Latest Earnings and Valuation
Keppel DC REIT (SGX: AJBU) is a real estate investment trust that owns 13 operational data centres across Asia and Europe. It also has a data centre in Germany that is under development at the moment, with an expected completion date in the second quarter of this year.
There are two things about the REIT that investors may want to know about right now: Its latest financial performance and valuation.
Here’s a table showing important items from Keppel DC REIT’s income statement for the fourth quarter of 2017:
Source: Keppel DC REIT 2017 fourth quarter earnings press release
We can see that Keppel DC REIT had a great quarter, with strong growth in gross revenue, net property income, distributable income to unitholders, and distribution per unit (DPU).
The stronger performance was driven by new acquisitions (of three data centres), higher recurring revenue from an existing data centre in Singapore, and favourable currency movements. These were partially offset by lower income from certain properties.
The REIT’s adjusted distribution per unit (DPU) increased by 4.8% from 1.31 cents in 2016’s fourth quarter to 1.75 cents. The adjustments were for a preferential offering conducted in November 2016, and a one-off net property tax refund recorded in 2016. Without the adjustments, Keppel DC REIT’s DPU in the reporting quarter would still be 1.75 cents, but it would have been 33.6% higher than a year ago.
Keppel DC REIT ended the reporting quarter with a portfolio occupancy rate of 92.6%, and a weighted average lease expiry (WALE) by leased area of 9.1 years.
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows Keppel DC REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
Source: SGX Stock Facts
We can see that Keppel DC REIT is trading at a premium to the market given its higher PB ratio and lower distribution yield.